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Your Guide To Saving Money Through Federal Tax Credits

When most of us think about tax time, we think about all of the money that we won’t be getting back. But in reality consumers just like you save loads of cash each year through money-saving federal tax credits. The trick is simply to familiarize yourself with the different money-saving federal tax credits so that you can take full advantage of them when the opportunity arises. Below is a list of money-saving federal tax credits that could have you keeping more of your money in your pocket this year.

Child Care Credit

Your Guide To Saving Money Through Federal Tax Credits The child and dependent care federal tax credit is a tax credit that helps eligible individuals who had to pay for care for children or other dependents by offering tax relief in the form of a deduction in what is owed. You must meet precise requirements in order to qualify for this money-saving tax credit. In general, you’ll need to prove that the care you paid for was for a qualifying person. Also, you’ll have to prove that you had to pay for dependent care either because you were working or out looking for work. If you have no earned income for the year, then you cannot qualify for this tax credit.

Energy Tax Credit

Another money-saving tax credit that you may be eligible is the energy tax credit. If you happened to have made energy saving home improvements during the past year, then you might be able to receive a deduction in the tax that you owe. You may also qualify for a tax break if you purchased energy-efficient products for your home.

The energy tax credit pays 30 percent of the amount you spent on energy-efficient home updates up to $1,500 dollars on items such as stoves, heating, roofs, windows and doors. An additional federal tax credit exists with no upper limit for geothermal heat pumps, solar energy systems, and small wind turbines.

Hybrid Car Credit

If you purchased a hybrid vehicle during the past year then you may be eligible to receive a money-saving tax credit. The hybrid car credit may be worth as much as three thousand dollars. You will have to check with the IRS to find out the exact amount that you can receive, as it is based on the exact make and model of the car and what state you purchased it in.

Adoption Tax Credit

This money-saving tax credit helps parents with the expenses of adopting an eligible child. Adoption fees, attorney fees, travel expenses, court costs and other costs directly involved in the adoption process qualify. There are specific eligibility requirements that you and the child must meet. The amount of the tax credit depends on specific criteria such as the filer’s income level and filing status. The adoptions credit is subtracted from the tax that you owe to the IRS.

Saver’s Credit

This money-saving tax credit was formerly called the Retirement Savings Contribution Credit and is for people who make contributions to a retirement plan. Qualifying plans include both traditional and Roth IRA’s, 401(k), 403 (b) and 501 (c) plans, and others. With this credit you may be able to reduce your income tax up to two-thousand dollars if you are married (up to one thousand if you’re single). Just how much you can get depends on the amount that you contributed and how much of that qualifies.

This is hardly an exhaustive list of all of the money-saving federal tax credits that you may be able to take advantage of this year. Be sure to research these and other possible federal tax credits that you can claim and you could find yourself saving thousands of dollars this year.